Bush Team Disputes Charge Tax Cut Favors Rich

[Michael Pugliese <debsian@xxxxxxxxxxx>]

http://dailynews.yahoo.com/h/nm/20010228/pl/budget_taxes_dc_1.html
http://w3.access.gpo.gov/usbudget/fy2002/pdf/blueprnt.pdf
http://www.ctj.org/
 Wednesday February 28 1:27 PM ET
Bush Team Disputes Charge Tax Cut Favors Rich

By Randall Mikkelsen

WASHINGTON (Reuters) - On the day President George W. Bush (news - web
sites) presented his $1.6 trillion tax cut proposal to Congress, his
economic team on Wednesday aggressively defended the plan against charges it
targets benefits to the rich.

Treasury Secretary Paul O'Neill called the charges ''nonsense'' aimed at
making a populist point and said the share of all taxes that are paid by the
wealthy would rise under Bush's 10-year tax cut plan.

But in an often-contentious news briefing on Bush's budget proposal for
fiscal 2002, which the president formally released on Wednesday, O'Neill
declined to say how the cut would be distributed in dollar terms.

``It's a nonsense set of statistics,'' O'Neill said, referring to estimates
by the Citizens for Tax Justice advocacy group which contend the Bush plan
is skewed to the rich and which have been adopted by Democrats opposed to
the plan.

The across-the-board cut in tax rates, the largest component of Bush's tax
cut, would give the largest percentage reductions to low and moderate income
taxpayers, Bush officials said. Bush also proposed doubling the per-child
tax credit, eliminating estate taxes and reducing the disparate tax
treatment of two-income married couples.

The Citizens for Tax Justice, which favors progressive tax policies placing
greater burdens on the wealthy, estimated Tuesday that the wealthiest one
percent of Americans would receive some 45 percent of the combined benefits
of Bush's proposed tax cuts, in dollar terms.

The average income tax cut for the top one percent of taxpayers, those
earning $373,000 or more, would be $28,688, the group projected, and the
average total tax cut would be $54,480. This compares with a total tax cut
of $47 for the lowest 20 percent, those earning less than $15,000.

PLAYING GAMES WITH NUMBERS?

``They're playing games with the numbers,'' O'Neill said.

Asked for Bush administration estimates of the distribution, he said, ``It
doesn't seem to me legitimate to even try to respond to a question that is
based in a fiction of combining, not just income taxes, but payroll taxes
and cobbling up a bunch of other pieces of stuff to make a populous point
that has no basis in fact.''

``The fact is, what the president has proposed for tax changes moves the
incidence of taxes proportionately to the higher-income group, not the
lower-income,'' he said.

Bush projected during his campaign the income tax cut would eliminate
federal income taxes for 6 million low-income families and cut marginal tax
rates for millions of others.

Democrats opposed to the tax cut say it favors the wealthy and threatens to
throw the budget back into deficit if the economy sours unexpectedly.

White House Budget Director Mitch Daniels said there was ''vastly more than
enough room'' in the long-term budget for Bush's tax plan, and that a $1
trillion reserve fund proposed by Bush would guard against ``vagaries'' of
the future.

O'Neill said it would cost about $20 billion to $30 billion extra to make
the tax cut retroactive to January 1, 2001, which Bush has urged but did not
formally propose in his budget.

Accelerated Phase-In

It would cost additional money to accelerate the phase-in of the rate
reductions, another change the White House is considering, he said.

O'Neill said some acceleration would be possible without impinging on other
budget commitments for next year. He added that the phase-in dates may need
to be adjusted to stay within the overall $1.6 trillion, suggesting later
reductions could be stretched out.

However, he said, ``There's been no indication in all the meetings that I've
attended with the president on this subject that he is prepared to give an
inch on the principles that are embedded in this tax reform program.''

The budget puts an additional $417 billion price tag on the tax cut, in
terms of how much interest the government will have to pay if it cuts taxes
instead of repays outstanding debt.

O'Neill discounted the significance of the figure, saying it was included in
line with established budgeting principles that do not account for economic
benefits of the cut, and cited estimates that the benefits would outstrip
the interest cost.

Democratic Claims

Daniels also dismissed as ``preposterous'' Democratic claims that Bush would
weaken the Social Security system.

Bush has proposed using $2 trillion of the $2.6 trillion in anticipated
Social Security system surpluses to pay down government debt, leaving $600
billion that Daniels said could be used to fund Bush's proposed private
investment accounts for workers.

Democrats have said such accounts would drain money from the system that
would be used for benefits.

In addition, Daniels sought to downplay any focus on budget cuts recommended
by Bush, saying there were few cuts and vowing to wean reporters from a
``strange fixation'' on them.